South Africa's gross tax collection increased by 29.5 percent year on year in the first nine months of the fiscal year 2021/22. The Bureau for Economic Research (BER) noted in a research note on Monday that this contrasts to a projected 19 percent increase for the entire fiscal year, from November 2021 to March 2022, as outlined in the November 2021 Treasury budget announcement.

“If the current rate of outperformance is sustained through March, tax revenue in 2021/22 will exceed the November projection by a significant R132 billion.

“This supports our view that the main budget deficit for 2021/22 will turn out to be notably smaller than the 6.6% of GDP projected in November.”

On February 23, Finance Minister Enoch Godongwana will deliver his first budget address. Godongwana said in his medium-term budget policy statement (MTBPS) on November 11 that the government is still committed to reducing the budget deficit and stabilizing the debt-to-GDP ratio – and that staying the course, barring major new shocks or unbudgeted spending commitments, will result in a primary fiscal surplus in 2024/25.

“Over the next three years, spending will remain restrained. To avoid a widening of the budget deficit, changes to spending will be funded through improved revenue performance or through reprioritisation and reviewing existing programmes.”

Prior to the economic catastrophe in 2020, South Africa's fiscal position was already precarious. While rising commodity prices have enhanced in-year revenue prospects, these short-term gains have resulted in falling surpluses over time.

Revised revenue projections, for example, fell R284.7 billion short of pre-Covid-19 expectations until 2022/23, according to Treasury.